AOL to Cut Staff Strength to Give Core Businesses More Air to Breathe

AOL has announced its decision to cut its staff strength by 10% across boards and locations worldwide. The decision will affect nearly 700 staffers who will be given pink slips by the end of March in the company. AOL which moved from being an ISP to focus more on growing its Internet Advertising business after Time Warner took it over has been facing business pangs since some time now. It seems AOL takes the idea of fall winter quite literally having trimmed its workforce twice in the past 2 years around fall owing to restructuring of the business and slow growth.

Things haven’t worked out quite well for the once premier email and Internet Access provider and its shift to online advertising hasn’t worked out well despite some optimistic growth expectations. AOL on its part has wanted to develop “the most sophisticated global ad network” and has been able to rope in and build some worthy publishing names in this quest. However, following some sound growth of other independent publishers and now the recession AOL hasn’t been able to take its flight yet. Late last year it finally split its business apart while its advertising partner Google acknowledged a loss on its $1 Billion 5% investment in AOL.

In its bid to earn worldwide supremacy it had also launched its Indian arm and also brought it’s major advertising network to India last year. I had blogged about why AOL had the right mix to take the biggest share in the online advertising market in India, however it seems with marketers getting careful with their spends globally it has put its breaks on the Internet behemoth.

According to the company, post the axing of jobs, the idea would be to concentrate investing on three key growth areas – advertising, publishing/websites and social networks.

Now, what can AOL do to grow these areas? It already has a huge list of over 90 high profile websites in its stable and one of fastest growing social network in Bebo as well. However, with even bigger names in publishing reporting losses of nearly 40% and Facebook and MySpace still looking at that elusive social networking monetizing model can AOL really bring its core areas out of troubled waters? It’s India launch though created some initial buzz hasn’t really picked on while Web 18′s In.com has comfortable gone onto number 2 position despite being the latest entrant in the portal segment (though Web 18 also has taken a beating in terms of numbers). This despite AOL’s attempt to go local in a number of ways.

It has also been looking for a merger since over a year with some of the leading publishing names, and it remains to be seen if it continues to pursue a similar strategy this year to leverage on wider advertising bases and cut costs.